Bards Lost in The Metaverse Episode 19 - Cryptocurrency Part 2: Wallets
It’s part 2 of the cryptocurrency mini series and this week Sharn and Andy are talking about crypto wallets.
In this episode they take the next step and see what it takes to actually buy and own cryptocurrencies. Which leads to the most essential thing you will need in order to buy crypto, a wallet.
The Bards started the episode with Sharn reading out the below ChatGPT created summary of Sharn and Andy’s research:
Chat GPT Summary of this Episode:
In this episode we will take a deeper dive into what it takes to buy and own cryptocurrencies. The most important aspect of owning crypto is having a secure wallet to store your private keys. A crypto wallet is a device, program or service that stores the public and private keys for cryptocurrency transactions and also offers the functionality of encrypting and signing information. It is important to have a secure wallet as it proves your ownership of digital assets and allows you to make transactions. There are various types of wallets available such as paper wallets, hardware wallets and online wallets. Each type has its own tradeoffs, for example paper and hardware wallets are more secure but harder to access, while online wallets offered by major exchanges are easy to access but dependent on the exchange's security measures. Some investors also choose to have a combination of hot and cold wallets for added security.
They then dived deeper into all of these topics, and below are the notes from their research covering crypto wallets, exchanges and staking.
What is a Crypto Wallet?
Definition (wikipedia): “A cryptocurrency wallet is a device, physical medium, program or a service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often also offers the functionality of encrypting and/or signing information. Signing can for example result in executing a smart contract, a cryptocurrency transaction, identification, or legally signing a 'document'.”
Crypto wallets store your public key, and keep your private keys safe and secure. Private keys are an encrypted string of characters that act as a password to give you access to your cryptocurrencies, and verifies transactions or proves ownership, allowing you to send and receive cryptocurrencies like Bitcoin and Ethereum. Public keys are used to send cryptocurrency into a wallet, kind of like bank account numbers that enable people to send you money, but they can’t access your account. Crypto wallets that store these keys come in many forms, from hardware wallets like Ledger (which looks like a USB stick), to mobile apps like Coinbase Wallet, which makes using crypto as easy as shopping with a credit card online.
Why are crypto wallets important?
Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money. That’s why it’s important to keep your hardware wallet safe, or use a trusted wallet provider.
How do you use a crypto wallet?
Crypto wallets range from simple-to-use apps to more complex security solutions.
Two types of wallets: Cold Wallets and Hot Wallets.
Cold Wallets - not connected to the internet, key stored offline
Cold wallets are storage methods or physical gadgets designed to store crypto in a format that is not connected to the internet. This type of storage helps enhance the security of your cryptocurrency. There are two types of cold wallets:
Paper wallets: Non-custodial cold wallet. Keys are written on a physical medium like paper and stored in a safe place. This of course makes using your crypto harder, because as digital money it can only be used on the internet.
Hardware wallets: Non-custodial cold wallet. Keys are stored in a thumb-drive device or external hard-drive that is kept in a safe place and only connected to a computer when you want to use your crypto. The idea is to try to balance security and convenience.
Whatever their form, a cold wallet provides “cold storage” for your crypto keys. This greatly reduces risks associated with hacking, but cold wallets lack many of the additional trading and integration features prevalent among hot wallets, and risk being lost or destroyed.
Hot/Software - connected to the internet, key stored online
Hot wallets or online wallets are connected to the internet. They’re often available as a standalone product—a “software wallet”—or as a feature offered by a crypto exchange—a so-called “exchange wallet.” We will talk about exchanges shortly, but often these exchange wallets are custodial wallets in which a third party (the exchange) holds your private keys. Non-custodial hot wallets do exist and are usually mobile or desktop apps.
In online wallets, your private crypto keys are stored in an app or other software, which makes sending, receiving, and using your crypto as easy as using any online bank account, payment system, or brokerage.
Online wallets offered by major exchanges are the simplest way to get started in crypto and offer a balance of security and easy access. (Because your private info is online, your protection against hackers is only as good as your wallet provider's security – so make sure you look for features like two-factor verification.)
Using multiple types of wallets:
Crypto investors may store the same coins in multiple wallets. That means you can hold the same token or coin in both a cold and a hot wallet.
Hot wallets make it easy to execute crypto transactions. But since hot wallets are hosted online, they are more vulnerable to hackers. That’s why some users look to place their crypto in cold storage as a long-term solution.
Compatibility between wallets helps if you’re looking to access additional features. But a word of caution: If you have multiple wallets for the same crypto or token, you may have heightened security risks, since there are more touch points to reveal the keys to your crypto.
Security takes center stage when it comes to crypto, so some hot wallets offer a form of repayment for stolen crypto. That’s an important feature for assuring your peace of mind and ensuring it’s a good place to park your non-fungible tokens (NFTs).
Custodial Vs non custodial wallets:
Crypto exchanges such as Coinbase provide custodial wallets, meaning they’re responsible for safeguarding your keys. Anytime you initiate a crypto transaction on an exchange, they digitally “sign” it using your private key from within the wallet. This all happens seemingly automatically, with little to no user intervention required. Many users prefer custodial wallets because they would rather not bother with security themselves. However to others, trusting control of their private keys to a third-party is completely unthinkable.
For those more security-minded users, you might like a non-custodial crypto wallet. When using a non-custodial wallet with your crypto assets, no third-party will have access to your wallet’s private keys. Not even the wallet provider. Non-custodial requires a greater degree of technical know-how than exchange-provided custodial wallets, so there may be a slight learning curve involved. Non-custodial wallets allow users to serve as their own banker, but the trade-off is that wallet security also becomes their sole responsibility. A lost account password at a crypto exchange can likely be recovered. However if you’re using a non-custodial wallet and misplace your recovery phrase, your funds could be lost forever. That said, there are some safeguards in place to help avoid those circumstances.
When referring to the age-old debate of custodial vs. non-custodial wallets, a common refrain among crypto enthusiasts is “not your keys, not your crypto”. Whoever controls a wallet’s private keys, whether it’s an individual or a corporation, has unfettered access to its corresponding assets. Many users believe this means unless you’re using non-custodial wallets for your private keys, you don’t actually “own” your crypto.
What are the most popular hot/software/mobile wallets and what's the difference between them?
Below are some of the main wallets available and the ones that were named Money.com’s top picks for 2023.
Coinbase Wallet - Coinbase Wallet (Best for Beginners - money.com)
Coinbase is a leading crypto exchange, and it offers three different crypto wallets. The Coinbase Wallet is one of the exchange’s hot wallet products. The other two wallets offered are the Coinbase dApp Wallet and the storage option available via Coinbase Exchange.
According to the company, Coinbase Wallet supports “hundreds of thousands” of crypto assets. But there are a few caveats. Most notably, Bitcoin is only supported through the wallet’s mobile app.
The Coinbase Wallet seamlessly connects to its native crypto exchange and many other major decentralized crypto exchanges (DEXes).
Coinbase Wallet has also teamed up with cold storage company Ledger to provide cold wallet compatibility and options.
Trust wallet (Best for Mobile - money.com)
Trust Wallet operates in partnership with a major crypto exchange. It is the official wallet of Binance, the international digital asset firm, and that partnership gives users the ability to buy, sell and trade directly from their wallet. It is fully open-source — a distinction that only a handful of competitors share.
Assets supported: More than 1 million.
Can convert to cold storage: No.
Staking/DeFi support: Yes.
Buy Crypto with a Card: Yes
Metamask (Best for Ethereum - money.com)
If you’re a regular user of applications on the Ethereum blockchain, chances are you’ve come across MetaMask. Free and open-source, MetaMask can store any digital asset that’s built on Ethereum (there are more than 700,000). MetaMask also integrates with many of the “Web3” applications that exist on the Internet and require crypto transactions to work.
MetaMask has mobile and browser-based wallets, though it does not have a desktop app. MetaMask also does not have staking directly in its app. You can, however, easily stake tokens using the apps that connect to MetaMask on the web. Just remember that if you’re not a big user of Ethereum and its related tokens, MetaMask might not be much help to you.
Crypto.com Defi Wallet (Best deFi wallet - money.com)
Crypto.com DeFi Wallet is a wallet created by a company mostly known for its crypto exchanges. It’s specifically tailored for use in what is known as decentralized finance (DeFi), which is a sector of the crypto world focused on lending, saving and other financial products that don’t rely on a central broker. Users of Crypto.com DeFi Wallet can use their crypto holdings to interact with DeFi products both on their mobile app and in a browser extension. It also has a desktop app that integrates with Ledger hardware wallets.
Another offering that might be of interest to some security-minded users is the availability of two-factor authentication. It’s worth noting that many competitors, however, don’t have 2FA, arguing that it raises the risk of losing your crypto and is made redundant by some of the fundamental technology of wallets.
Side note, Crypto.com Arena is home to the LA Lakers.
Exodus (Best for Desktop - money.com)
Exodus offers a solid set of software tools, including a mobile app, a desktop app and a browser extension. Its products allow users to buy, trade or stake cryptocurrency directly from their wallets, and it has an integration with the Trezor cold wallet intended to help people easily move crypto from hot to cold storage. Exodus, which is free to use, also has a solid library of explanatory content for people who are learning about crypto. Exodus supports about 260 cryptocurrencies, including many of the most popular assets. However, that number is smaller than some of its competitors who say customers can store tens of thousands of different types.
Ledger Nano S Plus - (Best Crypto Hardware Wallet - money.com)
Manage over 5,500 digital assets. Allows up to 100 apps installed simultaneously.
Electrum - (Best Desktop Bitcoin Wallet - money.com)
Bitcoin focused. Supports hardware wallets.
BlueWallet - (Best Mobile Bitcoin Wallet - money.com)
Has multiple wallet architecture to allow maximum flexibility. Has options such as Bitcoin Wallets, Watch-only, Multisig Vaults and Lightning, but can import most wallet standards including Electrum and Bread wallets.
SafePal is a hot wallet that serves more than 6 million users across more than 190 countries. It supports all major cryptocurrencies.
One major perk of SafePal is its integration with crypto exchange Binance. This means you can seamlessly connect to Binance for the buying and selling of crypto via your SafePal wallet.Another plus is that you get the best of both worlds with SafePal: cold and hot crypto storage. The SafePal hardware cold wallet is relatively inexpensive, costing about $50.
On the downside, customer service on SafePal is limited. Users have to fill out a “submit a request” form for support.
Guarda is a free, all-purpose crypto wallet whose users can access their crypto via mobile, desktop or browser extension. It says it supports more than 400,000 digital assets. Users of Guarda can move crypto into cold storage through an integration with the hardware wallet Ledger. Guarda also has staking programs available.
As always, do your research thoroughly if you are thinking about getting a Cryptocurrency wallet.
What are the most popular Crypto Exchanges and what's the difference between them?
What is a Crypto exchange?
A cryptocurrency exchange, or a digital currency exchange, is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.
What to look for in an exchange:
When choosing a crypto exchange that meets your needs, there are several factors to consider. The most important things to look at are:
Supported assets: What can you buy?
Payment methods: How can you buy or fill up your account (credit/debit cards, bank transfers etc)
Fees: Do your research.
Security: Security breaches and cyber theft are common in the crypto exchange landscape so do some research and get an understanding of the landscape before you dive in.
Customer service: Are you new or experienced do you want to chat with a bot or call someone etc etc
Reputation: Before you sign up for an account on a crypto exchange, it’s a good idea to research that exchange’s reputation first. Read customer reviews, check the news, research research research.
What are the most popular exchanges (Australia):
Link to article which goes into much more detail: https://www.business2community.com/au/cryptocurrency/best-crypto-exchanges
eToro – Overall Best Crypto Exchange Australia based investors can use
Crypto.com - Beginner-Friendly Crypto Exchange with Numerous Useful Features
Coinbase – Top Australian Bitcoin Exchange for Beginners
Binance – Cheapest Crypto Exchange for Spot Trading
Digital Surge – Affordable Crypto Investing Platform
Swyftx – Trade 310+ Cryptos with TradingView Charts
CoinSpot – Simplest Australian Exchange to Instant Buy Crypto
Outside of Australia
All of the above Plus Kraken and Gemini.
Staking is a way of earning rewards for holding certain cryptocurrencies. The reason your crypto earns rewards while staked is because the blockchain puts it to work. Cryptocurrencies that allow staking use a “consensus mechanism” called Proof of Stake, which is the way they ensure that all transactions are verified and secured without a bank or payment processor in the middle. Your crypto, if you choose to stake it, becomes part of that process.
Also not all Cryptocurrencies can be staked. the main ones are:
Ethereum (which recently shifted from proof-of-work).
As always, we have a lot to do and a lot more to learn. Hope you all have fun following along as we improve our understanding and knowledge!
You can find this podcast episode (and all our other episodes) here: https://anchor.fm/invokecreations , or directly on your favourite streaming services.
NOTE: Everything discussed during the podcast is simply our own interpretation of information we come across as we research topics, or is commentary based on our own personal experiences. We highly encourage everyone to conduct their own research into topics of interest as information, especially in the technical space, changes regularly.
Music track featured this week was titled Clover Skip and can be viewed/listened to here: https://www.youtube.com/watch?v=UJNO8oCiL5U
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As always, we’re off to put our bums on seats and do some work, so until next time stay dangerous!
Crypto wallets, hot and cold wallets. and non-custodial vs custodial wallets, and lists of the best/most popular wallets:
https://www.coinbase.com/learn/crypto-basics/what-is-a-crypto-wallet https://www.coindesk.com/learn/a-crypto-must-know-public-vs-private-keys/ https://www.forbes.com/advisor/investing/cryptocurrency/best-crypto-wallets/
Crypto Wallets Explained (Beginners' Guide!) by Crypto Casey https://www.youtube.com/watch?v=AQO7KePXUEQ